Dear Director of Child Development Programs:
Re-instatement of 5% Cap on Center-Based Reserve Accounts
This letter is to inform you of 2010 Budget Act language that requires the California Department of Education (CDE) to offset fiscal year (FY) 2010-11 Child Development apportionments in the amount of $83.1 million with funds maintained in contractors’ center-based reserve accounts for contracts issued pursuant to Education Code Sections 8230, 8235, 8240, and 8250. The spend-down of reserve funds is to occur in FY 2010-11 until each contractor’s reserve balance is five percent of the sum of the contract maximum reimbursable amount(s) (MRAs) contributing to the reserve account. The Budget Act also re-instates the five percent cap on center-based reserve accounts, effective July 1, 2011 (Education Code, Section 8450).
Initial Contract Amendments
Contractors will soon receive amendments to reduce the amount of current year appropriated funds, referred to as “State Base”, and incorporate center-based reserve funds, referred to as “Special Funds”, into their 2010-11 contracts. Contract MRAs and Certified Days of Enrollment will not change, but the funding source of each contract will be modified to include Special Funds and State Base funds for each affected contract. The amount of Special Funds being incorporated into 2010-11 contracts is the difference between the center-based reserve account balance less five percent of the total of contract MRA(s) contributing to the center-based reserve account. In the event that Special Funds are greater than the contract MRA, the state base will be zero.
Reserve account balances are based on FY 2009-10 June final report calculations, or FY 2008-09 June final balances in the event that a contractor’s FY 2009-10 June final reports are delinquent. For agencies that have more than one of the affected contract types, the amount of Special Funds and State Base funds in each contract is determined by the amount of excess funds in reserve and the prior year contract earnings as a percent of the total of the contactor’s center-based contract earnings. Please refer to the following example below, which demonstrates how the amount of Special Funds in each contract is determined if a contractor has multiple center-based contracts.
Excess in Reserve (account balance less 5 percent of the total of contract MRAs)
X
Contract Earnings as a Percent of Total Contract MRAs
Excess in Reserve: $22,000 |
FY 2009-10 CCTR MRA $100,000 FY 09-10 Contract Earnings $95,000 (95%) |
FY 2009-10 CSPP MRA $50,000 FY 09-10 Contract Earnings $50,000 (100%) |
FY 2010-11 Special Funds in CCTR Contract: $22,000 X ($95,000/$145,000) = $14,414 |
FY 2010-11 State Base in CCTR Contract: CCTR MRA - $14,414 = $85,586 |
FY 2010-11 Special Funds in CSPP Contract: $22,000 X ($50,000/$145,000) = $7,586 |
FY 2010-11 State Base in CSPP Contract: CSPP MRA - $7,586 = $42,414 |
Subsequent Amendments
Contracts will be subsequently amended when it is determined that the actual amount in Reserve has changed due to prior year audit closure for private agencies and as Local Education Agencies (LEAs) and Community College Districts (CCDs) revise reports. It is important that LEAs and CCDs ensure accuracy of revisions to prior year June final reports because the revision may result in current year contract amendments due to the change in the amount of Excess in Reserve (see initial contract amendment calculation above). The CDE will also be closely monitoring contract earnings throughout FY 2010-11 to ensure the $83.1 million in savings that the Budget Act requires.Child Development Fiscal Services (CDFS) is committed to ensuring that contractors who are providing services to certified children receive the proper amount of apportionments based on reports submitted by contractors operating within their contract MRAs. The amount received via apportionments and the amount being utilized from a contractor’s reserve fund for each period will equal the amount needed to operate within the terms of the contract.
Initial Apportionments
Due to the delay in the FY 2010-11 budget, CDFS will process advanced apportionments through November, which will equal 41.6 percent of your State Base funds. We will work diligently so that requests for payment are sent to the State Controller’s Office as soon as possible. As in FY 2009-10, contractors who operate both a part- and full-year preschool program will receive 100 percent of each month’s apportionments through the February apportionment. However, these apportionments will be based on the State Base and not the total MRA.
Subsequent Apportionments
Monthly apportionments will continue to be calculated based on the apportionment schedule in the Child Development Attendance and Fiscal Reporting and Reimbursement Procedures(commonly referred to as the “Greenbook”), but reimbursement will be based on the State Base amount in contracts, adjusted for contract earnings, rather than the total MRA. Expenses incurred to serve child days of enrollment beyond what is paid through advanced apportionments are to be covered by your reserve account funds. The apportionment schedule can be found on page 51 of the procedures at Greenbook 2010-11 (DOC).
Report Forms
Updated FY 2010-11 CDFS report forms are being revised so that contractors can report the amount of Special Funds spent during each report period. These forms can be found on our website at CDFS FY 2010-11 Forms. Beginning with second quarter reports, any report received using a prior version of a CDFS form will be considered delinquent. Contractors are required to spend the entire amount of Special Funds within their contract by the end of the contract year. Special Funds reported should be the amount spent from the Reserve for this purpose. Transfers from the reserve, which can equal up to five percent of the total of all center-based MRAs, should be reported as usual as a Transfer from Reserve on the June final report.
Please contact your Fiscal Analyst if you have any questions regarding this matter. For contact information, please visit our website at Fiscal Apportionment Analyst Directory.
Sincerely,
Original signed by Phyllis A. Savage
Phyllis A. Savage, Staff Services Manager III
Fiscal and Administrative Services Division
Child Development and Nutrition Fiscal Services
1430 N Street
Sacramento, CA 95814